Does more money equal higher confidence?

When hearing the celebrities’ confessions about their struggles with confidence, we often can’t help but wonder: how can this be? How can someone have beauty, money, talent, and everything that comes with these, and still lack belief in themselves? And if so, what drives such insecurity?

Well, according to psychologists, the answer depends on two things: the status the individual has, and the fact that “externalities” are not a sustainable source of self-esteem.

Status—we are also told—isn’t a vanilla concept. It’s bifurcated into two main types—socioeconomic (SES) and sociometric. The former relates to things as our income, education and occupation, while the latter is linked to intangibles as the respect, recognition and admiration we receive from close others—friends, family or co-workers.

Socioeconomic status (SES)

Research has found that a boost in SES doesn’t produce any substantial nor permanent leaps in our happiness, self-esteem, or overall well-being. A major reason for this is the so-called “hedonic adaptation,” or our ability to adjust quickly to the “good life”—to having more money, for instance, to getting a promotion or other forms of recognition.

Simply put, an increase in our SES can lead to an initial but short-lived spike in contentment and confidence. Once the honeymoon period is over, though, we subside to our baseline levels in terms of life satisfaction.

Yet another reason why SES is not a source of ever-lasting esteem and happiness is the economics law of diminishing marginal utility. The law generally states that the relationship between certain variables is an inverted U-shape. After a certain level, any additional unit of a good or a service brings less and less gratification to the individual who uses it.

The famous study by Daniel Kahneman and Angus Deaton—both Nobel-prize winners in economics, which describes the relationship between money and subjective well-being (happiness) is a perfect example of the Law. They discovered the magic number of 75—that is, higher income can bring happiness but only up to the level of $75,000 per year. Above this, money means just a higher number in our bank accounts or more stuff. But not greater satisfaction.

Sociometric status

Sociometric status, however, is quite different from the above and hence—it produces much distinct outcomes. For starters, it sources from the recognition and respect we receive from face-to-face groups and the individuals we interact with. Those high in sociometric status, studies have discovered, also have more friends, enjoy greater popularity and are invited to more social activities.

That is, sociometric status intensifies our “feelings of belongingness and interpersonal connection.” And although there may be some adaptation to an enhanced others’ respect, our happiness and well-being tend to be more sustainable and durable.

So, to be happy and have healthy self-esteem, it seems that we just need to achieve higher sociometric status.

But how do we go about climbing the sociometric ladder?

In order to move into a higher standing with others, scientists tell us, we need to be perceived (i.e. may not actually possess it) as competent in a certain area, and to have what’s known as a “instrumental social value”—personal characteristics that are deemed importation by others in the achievement of collective goals.

We need to simultaneously be seen as knowledgeable and be wiling to help others achieve their aspirations or agendas. And it makes intuitive sense—if people believe they can gain something from us, they will award us with a higher status.

But perhaps and even bigger question than “how” is “why”: why does sociometric status produce such different and higher quality results?

One reason may have to do with evolution, according to Prof. Cameron Anderson of University of California, Berkeley, who’s extensively researched the status phenomenon. More specifically—studies on chimpanzees have shown that enhanced standing amongst others was linked to greater survival rates and reproductive success.

Sociometric status, then, seems to matter not only to improve our happiness but it also ensures the continuity of our kin. It appears to be a winner.

What about self-esteem?

Generally speaking, people with higher status also have higher self-esteem, according to research. However, studies have uncovered that it’s sociometric status (as measured by respect from others, influence within a group, or a higher rank within an organization), not SES that can accurately predict our levels of self-assurance. In fact, the causality link between respect and self-esteem tends to be very very strong—close to 50%.

It’s fair to note that elevated SES (income specifically) can produce small increases in our self-esteem too. But the connection holds true under specific conditions—when income improves our social standing within the groups that are important to us.

That is, more money can affect our sense of worth when we perceive it to bring us higher status in society (of course, it’s all temporary as it’s susceptible to the hedonic adaptation rule and the perpetual quest for “more”).

However, research has discovered that when education, not income, is used as a proxy for SES, the link to self-esteem is stronger. In terms of numbers, prestige contributed to 21% and academia 16%, while salary—only 8%.

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In the end, if there is one thing to take away from the above, it’s this: Higher salary, an Ivy-League education or a prestigious occupation may bump up our confidence—true.

However, they are not a true, nor a sustainable source of it.

For two main reasons. High income or a great job are not guaranteed for life, so basing our worth on these variables may produce a very unstable sense of self. Additionally, not everyone is into the race for a stellar career and wealth—should we infer that such individuals lack any confidence whatsoever? Of course not. And this is why the income-confidence link is a flawed postulation.

Science steadily backs up the notion that it’s the strength and quality of our relationships, not the value of our possessions, that are the real key to longevity, fulfillment and happiness.

And although the external factors (prestige, status, salary, certificates) may make us feel better about ourselves, they are, to a way larger degree, the product of our character strengths and traits, which have steered us to pursue certain goals and achievements in the first place.

So, if you are after building a lasting confidence, the right way to go about this is to focus on earning respect and appreciation—by being passionate for knowledge, driven to gain competence, and willing to help others succeed.